How Ohio Taxes Social Security and Retirement Income

When you think about retirement planning, taxes may not be the first thing on your mind – but they should be close to the top of the list. Even in a state like Ohio, where some tax rules favor retirees, your financial picture can shift depending on how and where your income is sourced.

Thankfully, Ohio offers several advantages for retirees, including no tax on Social Security benefits and no estate or inheritance taxes. But other sources of income, from pensions to IRAs, are still taxable. And with recent changes to Ohio’s tax code, including a phased-in flat tax system, it’s worth taking a closer look at how your retirement income will be treated.

Whether you're retiring in Ohio or already living there, this guide walks through the latest rules, breaks down what is and isn’t taxable and outlines key strategies to consider to help you make the most of your income.

DOES OHIO TAX SOCIAL SECURITY BENEFITS?

Ohio does not tax Social Security income – regardless of your total income level. This includes:

• Retirement benefits
• Social Security Disability Insurance
• Survivor benefits
• Supplemental Security Income

Whether Social Security makes up the majority of your income or just a portion of it, you won’t owe any state taxes on those benefits in Ohio. This can offer meaningful tax relief, especially if you’re comparing Ohio with one of the nine states that still tax Social Security.

However, not all retirement income gets the same treatment. Nor does this mean Social Security is entirely tax-free – you’ll still owe taxes to the federal government.

WHAT RETIREMENT INCOME IS TAXED IN OHIO?

Outside the Social Security benefits listed above, most sources of retirement income are considered taxable under Ohio law, including:

• Traditional IRA and 401(k) withdrawals
• Private and public pensions
• Annuity income
• Capital gains and investment income
• Rental income or part-time consulting

If you build savings in tax-deferred retirement accounts, those required minimum distributions will eventually count toward your taxable income. It’s worth working with a financial advisor to time and structure withdrawals strategically, especially once you reach RMD age (currently 73 for those born between 1951 and 1959, and 75 for those born in 1960 or later).

HOW MUCH IS RETIREMENT INCOME TAXED IN OHIO?

Ohio is transitioning toward a flat income tax system. Here’s how things stand in 2025:

• For tax year 2025, Ohio uses two tax brackets, with a top marginal rate of 3.125% for income above $100,000.
• Starting in 2026, the state will move to a flat income tax of 2.75%, applying to all taxable income over the $26,050 threshold.

This simplified structure may help retirees with higher incomes plan more effectively. Still, it’s important to understand that the lower rate doesn’t apply across the board. Social Security remains untaxed, but your pension and IRA distributions are likely subject to tax.

If your income falls below $26,050, you won’t owe any state income tax at all, making Ohio even more favorable for low-to-moderate-income retirees.

ARE THERE ANY TAX CREDITS FOR SENIORS?

Ohio doesn’t offer sweeping exemptions on retirement income like some other states. But there are a few targeted tax credits that may apply to older residents:

• Senior Citizen Credit: If you’re 65 or older, you may qualify for a nonrefundable credit of $50.
• Retirement Income Credit: If you receive qualifying retirement income (e.g., pensions or annuities), you may be eligible for a credit of up to $200, depending on the amount received.

These credits won’t eliminate your tax liability, but they can reduce it slightly, especially if your income is moderate.

HOW THE FEDERAL GOVERNMENT TAXES SOCIAL SECURITY AND RETIREMENT INCOME

Although Ohio doesn’t tax Social Security income, the IRS uses your total income to determine whether your benefits are taxable at the federal level.

The IRS uses something called provisional income, which includes:

• Your adjusted gross income
• Tax-exempt interest (e.g., municipal bonds)
• Half of your Social Security benefits

Depending on how that adds up, up to 85% of your Social Security may be included in your federal taxable income.

FEDERAL TAX THRESHOLDS FOR SOCIAL SECURITY
 

Most retirees with income from 401(k)s, traditional IRAs or investments will see at least a portion of their Social Security taxed at the federal level.

STRATEGIES TO HELP MINIMIZE TAXES ON RETIREMENT INCOME IN OHIO

Even in a relatively tax-friendly state like Ohio, coordinating your withdrawals, income sources and timing matters. Here are a few strategies that may help:

1. Delay Social Security: Waiting until full retirement age (or beyond) increases your monthly benefit and delays the point when it becomes taxable.
2. Use Roth accounts strategically: Roth IRA and Roth 401(k) withdrawals don’t count toward provisional income or Ohio state tax.
3. Explore Roth conversions: Converting part of a traditional IRA to a Roth can reduce future RMDs and give you more flexibility later.
4. Leverage QCDs: If you’re 70½ or older, you can make Qualified Charitable Distributions from your IRA, helping reduce taxable income without increasing your AGI.
5. Withdraw tax-smart: Planning when and how to take money from different account types can help reduce your overall tax burden year-to-year.

BUILD A TAX-EFFICIENT RETIREMENT INCOME PLAN

Retirement should be a time to enjoy the life you’ve worked hard to build, not a time to be surprised by tax bills. While Ohio’s approach to Social Security and estate taxes may give you a head start, smart planning is what helps you stay ahead over time.

At Edelman Financial Engines, we help retirees create personalized income strategies that reflect your goals, and consider the latest tax laws. From coordinating Social Security and retirement withdrawals to reducing the impact of RMDs and planning your legacy, our financial advisors are here to help you make every decision with confidence.